Gold Price Forecast: XAU/USD hangs near YTD low amid stronger USD, Fed rate hike jitters

• Gold price comes under renewed selling pressure amid reviving USD demand.
• Hawkish Fed expectations, elevated US bond yields underpin the Greenback.
• Recession fears lend support to the safe-haven XAU/USD and help limit losses.

Gold price struggles to capitalize on the previous day's modest rebound from the $1,807-$1,806 area, or the YTD low and meets with a fresh supply on Tuesday. The XAU/USD remains depressed through the early European session and is currently placed just above the $1,810 level, down nearly 0.30% for the day.

Following a modest pullback from a seven-week high on Monday, the US Dollar (USD) is back in demand amid expectations for further policy tightening by the Federal Reserve (Fed). This, in turn, is seen as a key factor exerting some downward pressure on the US Dollar-denominated Gold price. The markets now seem convinced that the Fed will stick to its hawkish stance in the wake of stubbornly high inflation.

The bets were lifted by the Personal Consumption Expenditure (PCE) Price Index from the United States (US), which indicated that inflation isn't coming down quite as fast as hoped. Moreover, several Fed officials stressed the need to raise interest rates to bring inflation down. This remains supportive of elevated US Treasury bond yields and further drives flow away from the non-yielding Gold price.

Investors, meanwhile, remain worried about economic headwinds stemming from rapidly rising borrowing costs. This, along with geopolitical tensions, keeps a lid on the overnight optimistic move in the equity markets and lends some support to the safe-haven Gold price. This, in turn, warrants caution before placing fresh bearish bets around the XAU/USD and positioning for a further depreciating move.

Nevertheless, the prospects for further policy tightening by the Fed should continue to boost the Greenback and favours the XAU/USD bears. Gold price seems poised to weaken further below the $1,800 mark and test the 100-day Simple Moving Average (SMA) support, currently around the $1,792 area. This should act as a pivotal point, which if broken decisively will set the stage for deeper losses.

Technical levels to watch